As outlined in our recent article, Nasdaq previously proposed amendments to its rules regarding reverse stock splits (the “New Rules”) which can be found here. On November 1, 2023 the Securities and Exchange Commission (the “SEC”) issued an order to approve the New Rules. The order can be found here.
Generally, the New Rules shorten the notification period to Nasdaq while requiring listed companies to set the particulars of the reverse stock split further in advance than previously required. Here is the breakdown of how the New Rules change the timing of events before the reverse split becomes effective:
|
|
Previous Rule |
New Rule |
| Notice due to Nasdaq | 15 days before | 5 business days before |
| Complete information required | About 2 days before |
5 business days before |
| Public disclosure of split | 1 p.m. ET at least 1 business day before | Noon ET at least 2 business days before |
The New Rules are reflected in new rule 5250(b)(4), 5250(e)(7), IM-5250-3 and amended rule 5250(b)(1), which are currently posted in Nasdaq’s Rulebook and can be accessed here. As the New Rules have been approved by the SEC and posted in the Nasdaq’s Rulebook, listed companies are now required to comply with the New Rules.
If a company does not comply with the requirements of the New Rules and nonetheless proceeds with a reverse stock split, Nasdaq will halt trading in the company’s stock until all of the requirements in the New Rules are met and the dissemination of material news is complete.
If you have any questions about the amendments to the Nasdaq Listing Rules please contact a member of Harter Secrest & Emery LLP’s Securities and Capital Markets group at (585) 232-6500 or (716) 853-1616.